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Insurance Executive

Four Questions for Aspen’s Pat Hickey

Accumulation risk due to the increased size of marine vessels is something marine underwriters are keeping a keen eye on.
By: | July 6, 2017 • 4 min read
Topics: Claims | Marine | Underwriting

In April of 2017, the International Union of Marine Insurance underwriters, or IUMI, released a report pointing to increased energy losses and accumulation risks for marine underwriters. Pat Hickey, Executive Vice President, Marine, at Aspen Insurance shared with Risk & Insurance some of this thoughts on IUMI’s findings.

R&I: Grounding losses in particular are increasing sharply, according to IUMI. What’s at play here? What factors are leading to this?

PH: This is a very interesting, and disturbing, trend where human error is most likely the root cause. The question is what is driving it? I believe it is multi-faceted; however, there is evidence that we have become overly dependent on electronic navigation and enhanced technology to make decisions for us. Accordingly, we are losing critical human interaction and judgment to avoid these incidents.

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In addition, we must also consider general distraction due to mobile phones, tablets and other technologies unrelated to vessel navigation.  In January of 2016, an incident occurred on the Mississippi River near New Orleans involving tank barges and towing vessels that caused $60 million in damages to the vessels and docks. The U.S. National Transportation Safety Board (NTSB) determined that the captain of one of the towing vessels was on a personal call on his mobile phone just prior to the collision.

R&I: Given the losses we’re seeing, what changes might risk managers and insureds see going forward in aspects of the marine transit losses underwriters are willing to cover?

PH: Marine underwriters need to be flexible and creative, to cover global maritime risks, and very few risks are exactly the same. It’s incumbent on marine underwriters to know their customers’ exposures so they can build manuscript coverages around those unique risks.   As losses increase, skilled marine underwriters will look to partner with their customers to minimize, or eliminate, those risks. When we partner with a dedicated customer willing to work with our risk engineers, there are few challenges we cannot solve together. When we do not see the expected level of engagement or willingness to address losses, we may consider utilizing exclusions and higher retentions. We prefer to provide broad coverage to partners who focus on risk management since that can drive down both losses and premiums.

It would be naive for us to suggest that ports operating 24/7 with increased accumulation exposure are not at risk.

R&I: Accumulation risk in ports, notably those in China, is a concern, according to IUMI’s report. The explosion in Tianjin was such a serious incident on many levels. How likely is it that we could see another event on the scale of a Tianjin and why?

PH: Tianjin was perhaps the perfect storm; however, we need to consider the underlying exposures and regulations that could contribute to a future event. The vast increase in the size of cargo vessels quickly translates to greater exposure per vessel, and significantly greater exposure at major port facilities.  While steamship lines and ports do an exceptional job of quickly and safely moving freight, a relatively simple error of misdeclared cargo (e.g. hazardous materials) could end up causing a catastrophic loss. It would be naive for us to suggest that ports operating 24/7 with increased accumulation exposure are not at risk.

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R&I: Discussions are under way in our nation’s capital on increasing the coastal areas that would be open to oil drilling. After a relatively calm period of drilling exploration, what are the risks and opportunities for energy insureds and their marine underwriting carriers should drilling markedly increase again?

PH: These are very exciting discussions for the marine and energy industries in general. The expansion would require the deployment of fleets for drilling with accompanying support vessels. Further, it is possible that some dormant equipment in the Gulf of Mexico could be redeployed to the coasts. This would also create additional employment opportunities for displaced Gulf oil and gas professionals, and ultimately boost revenue for the sector. As a direct result, marine underwriters would see immediate additional opportunities on these risks that could help grow premiums. There are additional risks associated with possible expansion and these include incidents that cause pollution, loss of life, habitat damage, or impacts to areas not prepared to quickly respond to disasters. Overall, I believe the opportunities outweigh the risks.  I am confident that marine underwriters and risk engineers could help clients mitigate these risks.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession: Curt Gross

This director of risk management sees cyber, IP and reputation risks as evolving threats, but more formal education may make emerging risk professionals better prepared.
By: | June 1, 2018 • 4 min read

R&I: What was your first job?

My first non-professional job was working at Burger King in high school. I learned some valuable life lessons there.

R&I: How did you come to work in risk management?

After taking some accounting classes in high school, I originally thought I wanted to be an accountant. After working on a few Widgets Inc. projects in college, I figured out that wasn’t what I really wanted to do. Risk management found me. The rest is history. Looking back, I am pleased with how things worked out.

R&I: What is the risk management community doing right?

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I think we do a nice job on post graduate education. I think the ARM and CPCU designations give credibility to the profession. Plus, formal college risk management degrees are becoming more popular these days. I know The University of Akron just launched a new risk management bachelor’s program in the fall of 2017 within the business school.

R&I: What could the risk management community be doing a better job of?

I think we could do a better job with streamlining certificates of insurance or, better yet, evaluating if they are even necessary. It just seems to me that there is a significant amount of time and expense around generating certificates. There has to be a more efficient way.

R&I: What was the best location and year for the RIMS conference and why?

Selfishly, I prefer a destination with a direct flight when possible. RIMS does a nice job of selecting various locations throughout the country. It is a big job to successfully pull off a conference of that size.

Curt Gross, Director of Risk Management, Parker Hannifin Corp.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Definitely the change in nontraditional property & casualty exposures such as intellectual property and reputational risk. Those exposures existed way back when but in different ways. As computer networks become more and more connected and news travels at a more rapid pace, it just amplifies these types of exposures. Sometimes we have to think like the perpetrator, which can be difficult to do.

R&I: What emerging commercial risk most concerns you?

I hate to sound cliché — it’s quite the buzz these days — but I would have to say cyber. It’s such a complex risk involving nontraditional players and motives. Definitely a challenging exposure to get your arms around. Unfortunately, I don’t think we’ll really know the true exposure until there is more claim development.

R&I: What insurance carrier do you have the highest opinion of?

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Our captive insurance company. I’ve been fortunate to work for several companies with a captive, each one with a different operating objective. I view a captive as an essential tool for a successful risk management program.

R&I: Who is your mentor and why?

I can’t point to just one. I have and continue to be lucky to work for really good managers throughout my career. Each one has taken the time and interest to develop me as a professional. I certainly haven’t arrived yet and welcome feedback to continue to try to be the best I can be every day.

R&I: What have you accomplished that you are proudest of?

I would like to think I have and continue to bring meaningful value to my company. However, I would have to say my family is my proudest accomplishment.

R&I: What is your favorite book or movie?

Favorite movie is definitely “Good Will Hunting.”

R&I: What’s the best restaurant you’ve ever eaten at?

Tough question to narrow down. If my wife ran a restaurant, it would be hers. We try to have dinner as a family as much as possible. If I had to pick one restaurant though, I would say Fire Food & Drink in Cleveland, Ohio. Chef Katz is a culinary genius.

R&I: What is the most unusual/interesting place you have ever visited?

The Grand Canyon. It is just so vast. A close second is Stonehenge.

R&I: What is the riskiest activity you ever engaged in?

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A few, actually. Up until a few years ago, I owned a sport bike (motorcycle). Of course, I wore the proper gear, took a safety course and read a motorcycle safety book. Also, I have taken a few laps in a NASCAR [race car] around Daytona International Speedway at 180 mph. Most recently, trying to ride my daughter’s skateboard.

R&I: If the world has a modern hero, who is it and why?

The Dalai Lama. A world full of compassion, tolerance and patience and free of discrimination, racism and violence, while perhaps idealistic, sounds like a wonderful place to me.

R&I: What about this work do you find the most fulfilling or rewarding?

I really enjoy the company I work for and my role, because I get the opportunity to work with various functions. For example, while mostly finance, I get to interact with legal, human resources, employee health and safety, to name a few.

R&I: What do your friends and family think you do?

I asked my son. He said, “Risk management and insurance.” (He’s had the benefit of bring-your-kid-to-work day.)

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]